Some of Washington’s Educational Service Districts and the State Auditor’s Office are at odds over whether districts complied with federal law to report their financial statements, including Southwest Washington’s Educational Service District 112.
According to the State Auditor’s findings, ESD 112 failed from September 2016 through August 2017 to correctly report $6.3 million in future liability to the state Heath Care Authority, which provides health care to retired state employees. According to the auditor’s office, the district should have reported the liabilities under a specific set of accounting standards — Governmental Accounting Standards Board Statement No. 45 — but did not. The Auditor’s Office issued similar findings for eight other Educational Service Districts last month.
The district, however, disagreed with the findings, saying the GASB 45 reporting standards don’t apply in this case. Furthermore, GASB 45 is set to retire, as the Governmental Accounting Standards board adopts new accounting standard this year.
If it sounds like a bureaucratic technicality, that’s because it is. ESD 112 isn’t missing $6.3 million. They just didn’t report it the way the state says they should.
“It’s not something that we failed to pay out or report,” said Gavin Hottman, chief financial officer for ESD 112.
District officials added the organization has not reported this liability for nearly a decade, saying the accounting standards were never applicable, but it was never an issue before.
“We’ve been audited every year, and now it’s an issue,” Superintendent Tim Merlino said. “I don’t know where it was the first nine years.”
Kelly Collins, director of local audits for the office, said office specialists spotted the reporting problems as they prepared to transition to new standards.
“It’s very timely for having the conversation,” she said.
ESD 112 also pointed to the Auditor’s Office own newsletter, which in April reported that only 20 percent of the organizations that should have been reporting liabilities under this standard were. ESD 112 said that points to “a lack of clarity and definition around the appropriate implementation” of the accounting standards in their response to the Auditor.
“This is a systemic, statewide issue that is causing all kinds of challenges,” said Lori Oberheide, spokeswoman for the district.
Other Educational Service Districts around the state were dinged for the same failure, and all wrote similar responses disagreeing with the assessment.
ESD 105, which is based in Yakima County, wrote that it “completely disagrees” with the findings.
“This finding is completely unwarranted,” the ESD wrote. “ESD did not overlook or underestimate a liability under GASB 45.”
But Collins, with the State Auditor’s Office, said ultimately, it comes down to having accurate financial documents that comply with reporting standards.
“The underpinning of that is transparency to the public,” she said. “That’s the underlying goal.”
